National Electric Vehicle Halts Saab Production

Company Says Shareholder Failed to Provide Promised Finance

From left: National Electric Vehicle Sweden MD, Mattias Bergman, Swedish Minister of Trade, Annie Loof, China's Ambassador to Stockholm, Chen Yuming, vice mayor of Xingdao Li Chenggang and State Power Group CEO Kai Johan Jiang stand next to NEVS' first production of Saab 9-3 model in December 2013.
Associated Press

By

John D. Stoll

Updated May 20, 2014 11:27 am ET

STOCKHOLM—The Chinese-backed company working to revive Sweden's Saab automobile brand has been forced to halt production and pare back staff as one of its shareholders allegedly backed out of financing commitments, creating the need to find new investors.

National Electric Vehicle Sweden AB bought the Saab brand out of bankruptcy in 2012 and restarted production of the Saab 9-3 sedan on Sweden's west coast late last year. Producing a half-dozen vehicles a day and selling them online, the company had plans to build an electric car for sale in China as early as 2014. It eventually hoped to launch a range new models based on the so-called Phoenix vehicle architecture, development of which began when
General Motors Co.
GM -0.54%
owned Saab.

Although a small manufacturer in the global auto industry, Saab is a well-known Swedish brand that has amassed a loyal buyer base and was for many years under GM's ownership. Discarded along with other brands as part of the Detroit auto maker's bankruptcy plan, Saab found new life after a Dutch auto maker, Spyker NV, snapped up the assets. Spyker's attempt, however, failed, opening the door to new investors to revive the Swedish brand.

Nevs has been building 9-3 models in Saab's longtime factory in Trollhattan, using technology that was developed by GM. The Swedish company has yet to establish a physical dealer base, but has released pictures of its cars being delivered.

NEVS' Saab revival plan, however, hit a pothole as one of NEVS shareholders failed to live up to a financing agreement. The company said Tuesday that Qingbo Investment Co. Ltd. has "not fulfilled their contractual obligation to finance the operations."

Qingbo Investment Co. couldn't immediately be reached for comment. National Modern Energy Holdings Ltd., a holding company owned by Chinese-Swedish businessman
Kai Johan Jiang,
is the primary backer of the NEVS project.

However, NEVS said it has signed an agreement with a "major international automotive" company for joint product development, and is in talks with a separate auto company about potential ownership options. A NEVS spokesman couldn't immediately comment on these plans.

Meanwhile, to meet its near-term obligations, NEVS has halted production and is cutting back on consultants. In addition to conserving cash, this will allow NEVS to work with its new auto-company partners, it said.

To date, National Modern Energy Holdings has poured 3 billion Swedish kronor ($455 million) into the NEVS venture, but it has concluded that it cannot adequately fund the project on its own. In addition to paying suppliers NEVS said needs money to create a new battery factory and technology development center.

NEVS posted a loss of 121.4 million kronor on sales of 13.5 million kronor for the nine months from April through December 2012, according to documents filed with tax authorities in Sweden. Financial results for 2013 aren't available.